On 13 March 2018, the Court of Appeal handed down its decision on appeal from the decision of Teare J in Tonicstar Limited v Allianz Insurance PLC and Ors [2017] EWHC 2753 (Comm). [1]

The Court of Appeal (comprising the President of the Queens Bench Division, Sir Brian Leveson, and Underhill and Leggatt LJJ) unanimously allowed the appeal, ruling that the provision in the subject reinsurance contract providing for the appointment as arbitrators of “persons with not less than ten years’ experience of insurance or reinsurance” contemplated the appointment of Queen’s Counsel who had practised as a barrister specialising in the field of insurance and reinsurance for more than 10 years.

The respondents were underwriters of risks for the Port of New York, which claimed various losses arising from the attack on the World Trade Centre in September 2001. Underwriters settled those liabilities in May 2011 for approximately $42.5 million and then sought indemnity under its reinsurance contract with the respondents.

The Appellant reinsurers appointed an experienced Queen’s Counsel, but the Respondent applied to have him removed, arguing that the clause on its proper construction called for an appointee who had experience in the business of insurance or reinsurance, not in insurance or reinsurance law.

Teare J considered that he should follow an earlier decision of Morison J in Company X v Company Y (unreported 17 July 2000) in which it was held that a QC with considerable experience as a lawyer in insurance and reinsurance was not qualified to act as an arbitrator under a relevantly identical provision. His Honour did so having regard to what the Supreme Court had said in Willers v Joyce [2016] 3 WLR 534 [9], that, even though the earlier decision was not binding upon him, he ought follow it unless satisfied that there was a powerful reason for not doing so.

It was argued for the Respondent that an example demonstrating the difference between experience in the business and experience in legal matters relating to that business was to be seen in relation to sports. It was argued that a clause requiring experience in sport (for the purpose of a sport arbitration) would not be satisfied by experience in acting in legal matters concerning sport. The President, with whom the other members of the court agreed, drew a distinction between that example and the fields of insurance and reinsurance, observing:

The President noted that the Court of Appeal was not under the same constraint as the primary Judge, who had correctly felt bound to follow the earlier decision in circumstances where he did not consider that there were sufficiently powerful reasons for departing from it. Notwithstanding the desirability of certainty in commercial law (the earlier decision having stood for some 17 years), the President considered that the ability of the legal system to correct error was also a powerful consideration.

Ultimately, the President considered that the earlier decision could not be defended and should be overturned. The others members of the Court agreed.